In this piece, I evaluated two aircraft manufacturer stocks, Boeing (NYSE:BA) and Airbus Group (OTCMKTS:EADSF), using TipRanks’ comparison tool to see which is better. A closer look suggests a neutral view for Boeing and a long-term bullish view for Airbus.
Boeing, the largest aerospace company in the world, manufactures and sells airplanes, rockets, satellites, missiles, and launch systems. Meanwhile, Airbus designs, manufactures, and sells commercial jet aircraft, helicopters, and defense and space systems and services for governments, institutions, and commercial customers.
Boeing shares have plummeted 19% year-to-date, and the stock is off about 1% over the last 12 months. On the other hand, Airbus stock is up 6% year-to-date, bringing its one-year return to 25%.
The opposite year-to-date performances aren’t a huge surprise with all that Boeing has been going through in recent years. However, a closer look is needed to see whether all those issues are already priced into Boeing shares — and how Airbus’ valuation compares.
Boeing is unprofitable due to all the problems with its Max aircraft over the last few years, so we’ll compare the two companies’ price-to-sales (P/S) ratios to gauge their valuations against each other and that of their industry. For comparison, the aerospace and defense industry is trading at a P/S of 1.9, in line with its three-year average.
Since Airbus is profitable, we’ll also consider its price-to-earnings ratio. The aerospace and defense industry is trading at a P/E of 32.1, higher than the three-year average of 27.2.
Boeing (NYSE:BA)
At a P/S of 1.6, Boeing is trading at a slight discount to its industry, which is understandable considering all its issues. However, while the company did report promising fourth-quarter earnings results, another midair disaster involving its 737 Max 9 aircraft occurred in early January. Thus, a neutral view might be appropriate for Boeing at this time, pending some more positive updates.
The market reacted positively to Boeing’s fourth-quarter earnings report, sending the stock 5.3% higher on Wednesday following those results. Boeing reported an adjusted loss of 47 cents per share versus the consensus estimate of 78 cents per share in losses.
Net losses amounted to $30 million or 4 cents per share versus the year-ago quarter’s net loss of $663 million or $1.06 per share. The airplane manufacturer also reported $22 billion in revenue for the fourth quarter versus the consensus of $21.1 billion.
Commercial sales revenue also came out slightly ahead of expectations, at $10.5 billion versus the $10 billion that had been expected. Unfortunately, Boeing management declined to provide guidance for 2024 on account of the early January accident involving a 737 Max 9 flown by Alaska Airlines (NYSE:ALK).
The plane sustained a door plug blowout in midflight, and Alaska Airlines grounded the rest of its 737 Max 9 planes as a result. However, investors apparently weren’t too worried about this new problem, as they sent Boeing shares higher on Wednesday.
Overall, Boeing’s fourth-quarter print was about as good as it could be, but there are just too many question marks right now, with no end to the problems with the 737 Max aircraft in sight. Thus, a wait-and-see approach may be best.
What Is the Price Target for BA Stock?
Boeing has a Moderate Buy consensus rating based on 16 Buys, six Holds, and zero Sell ratings assigned over the last three months. At $263.70, the average Boeing stock price target implies upside potential of 26.8%.
Airbus Group (OTCMKTS:EADSF)
At a P/S of 1.9 and a P/E of 29.9, Airbus is trading in line with the industry regarding its sales multiple and slightly below regarding earnings. Due to the company’s long-term stock price gains and the prospect of picking up some orders in place of Boeing, a long-term bullish view might be appropriate for Airbus.
Airbus’ long-term gains suggest it could be an attractive buy-and-hold stock. The shares are up 52% over the last three years and 152% over the last 10, demonstrating staying power for the long term and making Airbus an attractive buy-and-hold position.
Further, one potential near-term catalyst for Airbus suggests investors might not have to wait long to see the stock appreciate meaningfully. Some news reports are starting to suggest that Airbus could benefit from the latest problems plaguing Boeing’s 737 Max aircraft.
Reuters reported recently that United Airlines (NASDAQ:UAL) had approached Airbus after the latest accident involving Boeing’s plane about purchasing more A321neo jets due to the delays in Boeing’s airplane deliveries.
Finally, Airbus pays a dividend yield of 1.14% with an attractive payout ratio of 35.41%, which shows the amount paid in dividends in relation to the company’s total net income. While the yield isn’t spectacular, the payout ratio suggests Airbus’ dividend is safe because a relatively low share of its net income is being paid as dividends. Thus, that dividend does provide a small added bonus to holding Airbus shares over the long term.
What Is the Price Target for EADSF Stock?
Airbus Group has a Moderate Buy consensus rating based on 10 Buys, two Holds, and two Sell ratings assigned over the last three months. At $169.95, the average Airbus stock price target implies upside potential of 5.95%.
Conclusion: Neutral on BA, Long-Term Bullish on EADSF
Boeing’s problems have been going on for years, with the first deadly crash of a 737 Max aircraft occurring in October 2018. However, the latest accident involving one of Boeing’s planes suggests it could still be a while before those safety issues are resolved. Thus, a wait-and-see approach may be best for Boeing at this time.
Meanwhile, Airbus has everything to gain from Boeing’s problems. In fact, news reports are starting to suggest airlines are turning to Airbus in place of Boeing, which could dramatically boost Airbus’ sales over the long term. However, barring any near-term increase in sales due to Boeing’s problems, Airbus still looks like an attractive buy-and-hold option due to its long-term stock-price appreciation.
